I was surprised to see Novara Media publish an interview with Stephanie Kelton on modern monetary theory as historically they have been very resistant to it, being influenced (I think) by James Meadway, who was the very poor economic adviser to John McDonnell, who amongst other things claimed that the left could have no interest in MMT as there was no theory of class implicit within it. As far as I know, there is also no theory of class implicit in the theory of gravity, but that does not stop it from being a good description of what actually happens, just as much of modern monetary theory is.
It appeared they relented to requests. This is that hour-long interview:
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
There are links to this blog's glossary in the above post that explain technical terms used in it. Follow them for more explanations.
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
It was an enjoyable and enlightening interview. Also, after a long wait for the UK release, I watched Stephanie’s documentary Finding the Money. Has anyone tried to organize a private screening here in the UK, at the local hospital, university, or other organization? I’m sure many leaders in those organizations must face the imposed cuts to their departments, wondering what is happening. Not realizing it doesn’t have to be that way.
I’ve watched Finding the Money online. It’s an excellent documentary and deserves the widest audience but I’m not convinced its distribution model will ensure this happens.
It won’t
Available on Vimeo isn’t good eough. If “Finding the Money” is not available on Amazon Prime, Netflix etc. is not going to cut through. Such a shame, as its a brilliant documentary
Why would they want it out there?
The ‘global release’ of “Finding the Money” was via the Vimeo app, which sounded fantastic to me until I found out that app is no longer available on smart TVs (support ended June last year). So users can only watch “Finding the Money” on a phone or laptop.
That’s not good enough for a film this long and into which so much effort went. Its absolutely imperative “Finding the Money” makes it onto at least one of the main streaming platforms e.g. Netflix.
PS I believe this has only happened so far in the US.
I sort of agree with the “enjoyable & enlightening interview”.
Kelton was, as ever very interesting & very well spoken. However, Ash Sarkart admitted that she was a lit graduate – fine. The “interview” was about finance. Bastani (see lower posts) is not convinced by MMT. This begs the question – why was there not a heavy-weight finance type asking questions? If Bastani is not convined – why was he – not the questioner?
This was a missed opportunity on the part of Novara – or, perhaps they did not have in their team somebody that could cross-examine Kelton? Why not James Meadway? (as noted a MMT sceptic)
Reason why? Kelton would have demolished Meadway and Bastani.
& we can’t have that – can we? on prime time Novara Media.
weak weak weak…………
I tend to agree….
private screening here in the UK, at the local hospital, university, or other organization?
Brilliant idea. That should be a priority.
(I’m just not sure who’s priority)
Could persuade many professionals, students etc to see that austerity is a choice not a necessity and that their institutions can and should be properly funded starting right now.
Love Stephanie’s analogy about the Labour Party’s myth of “blackholes” existing that if you dig a hole in the ground the dirt has to go somewhere it just doesn’t disappear and so with government deficit spending it goes into the pockets of the non-government sector!
Currently instead of a House of Commons we have a House of Children who believe in this myth of a “blackhole.” At root they believe in it because the “rich” are endlessly making out it’s a reality because they greedily want to minimise their taxes. It really is a waste of time voting for politicians who as the old adage states can’t even put two and two together as far as logic goes!
Unfortunately black holes are not like holes in the ground. Stuff that enters a black hole really does disappear, at least as far a we are concerned. The more worrying thing is that black holes have infinite capacity, tend to suck everything in, and distort space and time itself. They also have no agreed scientific explanation of how or why they exist. Altogether a pretty apt description of Reeves’ black hole I think.
But there are no such black holes on earth
There are just holes, with debris dug from them
The analogy still stands.
The fact that “we can’t see it” is an important point to get across.
Everyone should be asking where the contents of that black hole went. A proper answer to that question could force major changes in the running of the UK economy.
Perhaps the “little guys” would get a say.
Aaron Bastani who works for Novara Media has said: “We interviewed Stephanie Kelton last week! I’m a Marxist. I don’t buy the arguments that MMT makes.”
Source and thread: https://x.com/AaronBastani/status/1847738700534600169
But he offered no argument.
I am not a Marxist
There are still Marxists?
In as many varieties as ever they were.
There ought to be no disjunct between those identifying as Marxists and MMT.
It is a completely illogical statement
Perhaps Bastani should have a wee chat with Bill Mitchell, whose formative years, over 50 years ago, were influenced by Marx.
Ref Basanti – his comment is indicative of a closed mind. If he offered no alternative explanation then either he does not have one or he is incapable of pulling one together. Somewhat sad for a bright person. Perhaps those of a marxist inclination are somewhat closed minded /defensive?
His somewhat incoherent posts suggests he somehow links MMT with the US$ being the global defacto reserve currency, which presumably as a Marxist he doesn’t like.
Quite why he makes that link is totally baffling!
Agreed
Modern Marxists are all about history and memories – sod the future.
Marxism at its worst is just a revenge cult. And we know what happens when they come into play. I don’t need a revenge cult to speak for me.
I do wonder what Karl would be doing today? I think he would have got around to supporting MMT, because its all about the abuse of power, and money power – the power of government sovereign money which has been progressively wrenched away from the many to the few.
Abuse of power is also choosing NOT to do something, and we have seen too much of that since Thatcher – who lives on through our institutions and political parties like are current government.
When all is said and done, it is a bit of shit-show
‘Sorry if anyone feels that this is rude.
@Ian and Richard
As a Yank, I am a little slow on the uptake: What does being or not being a Marxist have to do the with the Theory of Gravity or Modern Monetary Theory?
It seems to be that some people are trying to make a connection where no connection exists.
If Barrack Obama wears Levi jeans and a flannel shirt from StowAg does that make the Levi company and StowAg woke or does that make Barrack Obama a farmer? I do not see the connections some people try to make.
You are not slow, my whole point was there is no link. There is no link, but they make one up and that annoys me.
I suspect Bastani is a neoMarxist, though as a neoMarxist of sorts myself his statement is idiotic. I’m wary of NovaMedia myself as it has a whiff of the old RCP about it (Furedi and Co.), maybe just old and seen too many pseudolefties.
The problem with Marxists is that they turned Marx into an object to study by the means of philosophy. While Marx was anti-philosophy and thought of himself a scientist. Something like what we today would call a social scientist.
Marx always argued that the state would eventually cease to exist once the true workers’ paradise was formed, thus rendering money irrelevant:
“From each according to their abilities, to each according to their needs” 🙂
And he was wrong
I contributed a post yesterday which whilst damning Marxism I did not think was over the top. Sorry if you felt it was. Technology again?
Whatever – but Bastani is the bloke who wrote ‘Fully Automated Luxury Communism’ (2020), the likes of which Paul Mason, Owen Jones, Andy Beckett heartily recommended.
Students of Abbey Innes will laugh heartily at a book that talks about the ‘returns’ on UBI, talks about ‘luxury’ and the weighing up of ‘limited’ amounts of government budget (apparently money is scarce!!!).
Once again, modern Marxism gives us a decent analysis but no real answers.
Starmer’s Labour gave us no analysis and no answers so I suppose the Marxists are better.
Slightly.
I gave always thought that the notion of fully automated luxury communism was absurd
I first came across it in 2015 when an attempt was made to persuade me of its merits. I was not convinced.
I think hat the segment from about 41 mins to 46 mins where Stephanie Kelton talks about “separating the fights” of government spending from taxing the wealthy (“we need to tax the rich, but not because we need their money”) is a critically important message for progressive people to understand and I was pleased that Novara Media highlighted (part of) that in their shorts.
https://m.youtube.com/shorts/rkOkBZOFXJE
Yes, I agree, that was the standout moment.
I am a Marxist
Groucho though not Karl
🙂
With regards to making connections that do not exists, someone should write a well researched book on Marx and Lenin: Groucho Marx and John Lennon.
Thanks for posting that Richard. A most impressive interview, both by Stephanie who explained so well and by the interviewer who posed a few sensible questions and then let Stephanie speak. Well worth watching.
I know nothing about Novaro Media or what reach they have, but hope many people will watch it and perhaps be persuaded.
Very much agree with my namesake above! It was a particularly liberating moment/conceptualisation, which gets to the heart of why MMT can make such a fundamental difference to the potential social and political discourse. Indeed, it also was borne out right at the end when the evaluation of the relative virtues of UBI and Job Guarantee schemes could be conducted in a free-er and more dispassionately constructive manner than is often the case.
An excellent interview – on both sides of the ‘desk’ and many thanks for bringing this to our attention.
You were right Richard, she wanted to ask about class!
The second half was better than the first, but she wasn’t given the time or the right questions to handle the basics. If I was a Novara viewer coming to MMT fresh, that video would not have convinced me as to where money came from, or why there was no ££22bn black hole. Neither would it have convinced me about what happened to Liz Truss.
Stephanie was clearly not comfortable with the structure, and she has said she needs 90mins – 2hrs to explain “money” in a convincing way to a sceptical audience.
I don’t think that video will help me much on the omnibus.
But hey, it’s a start. At least Novara engaged with the topic.
You hint at at my sentiments on this.
Brilliant. Ash asked all the questions I’ve wanted to ask and they were answered not avoided, especially the ones “if MMT is so great, why does no one follow it!”
The point about MMT liberating the need for increased state spending from the whole neo-liberal argument about needing the rich to help fund it I particularly liked. Do the rich even contribute to the sort of inflation, seeing as they’re more likely to hoard assets and save with some luxury spending, that would hike prices for the majority? I’m confused why the rich wouldn’t embrace MMT more as the whole austerity argument they often promote or pay people to promote creates this self-perpetuating social demand for their wealth given that austerity just generates more costs long-term, whether human or financial. Thanks.
I am not sure I follow all that
Might you reframe the question?
What escapes me with MMT’s arguments that government may employ taxation and low effective interest rates to guide resource allocation within a society to achieve desirable goal such as reduction of inequality or upward reallocation of resources when there are other effective ways for powerful interests to nullify positive societal effects. Today’s intellectual property rights , which, in the US for instance, get criticised to stifle competition and meaningful innovation, springs to mind or other laws that open loopholes for certain entities but not others. If a jurisdiction codifies misallocation and a certain societal stratification into law, it kinda looks like left pocket/right pocket thinking.
MMT does not guarantee an outcome
It says what can be done
It does not guarantee it will
Novara Media provided someone for interview who admitted that they could not or were unlikely to understand SK. Reminds me of an under the breath comment by John Mcdonall at a Labour hustings that he didn’t believe MMT. Novara just the same?
Much as I respect John McDonnell for his principled stand on many political and associated moral issues, I did also despair when he was shadow chancellor and he proclaimed his fealty to the nonsense that masquerades under the name of “Fiscal Rules”.
My wife and I recently watched Finding the Money, very good. But like Kelton says, and I believe you have Richard, MMT is misnamed as a theory. Really we should call it MMR, modern monetary reality.
Agreed
But MMR has its own unfortumte history
Perhaps MMP, Modern Monetary Practice, would work?
I like that
Or Modern Monetary Dynamics?
Ultimately it describes how something operates with no agency in itself within a complex system, rather like fluid dynamics.
Neat
Richard history is on the side of MMT.
First MMT is based on giants Keynes, Minsky, Lerner
Second WW2 proved the dynamics of very low rates, government mobilizing idle resources, and using public infrastructure banks as in the amazing American Reconstruction Finance Corporation.
These two columns urge us to return to the economic miracle this history has shown is possible
1. Pulitzer winner and presidential biographer Professor Doris Goodwin
The Way We Won: America’s Economic Breakthrough During World War II
https://prospect.org/health/way-won-america-s-economic-breakthrough-world-war-ii/
2. The Lesson Of World War II Robert Hockett – another guest of Keen
https://www.forbes.com/sites/rhockett/2021/11/12/war-on-inflation-part-1-the-lesson-of-world-war-ii/
Richard – great recommendation – may be the best interview I have seen of her.
I also liked Stephanie Kelton’s insight that commercial banks are in opposition to the government’s ability to create money from nothing like themselves because they want to charge the public a price for creating it. How on Earth can you have a true democracy with this dichotomy going on? Does this help explain all the politician shills from Thatcher onwards (she of the famous saying “government has no money of its own”)?
I also liked that – and had not thought that before
Stephanie attributes that brilliant point to Jamie Galbraith (via a tweet thread the other day)…
“And this, in the simplest terms, explains the deficit phobia of Wall Street, the corporate media and the right-wing economists. Bankers don’t like budget deficits because they compete with bank loans as a source of growth. When a bank makes a loan, cash balances in private hands also go up. But now the cash is not owned free and clear. There is a contractual obligation to pay interest and to repay principal. If the enterprise defaults, there may be an asset left over–a house or factory or company–that will then become the property of the bank. It’s easy to see why bankers love private credit but hate public deficits.”
I must admit to not hearing that one either. Galbraith makes his point superbly about the “contractual obligation” of private bank money vs Govt money (which comes with NO such obligation). Now we know why bankers are so very keen to end government deficits.
Galbraith’s 2010 article “In Defense of Deficits” Stephanie quotes can be found here https://www.thenation.com/article/archive/defense-deficits/
What is weird about this is it implies the existence of the loanable funds model.
Am very sure Jamie Galbraith knows that banks don’t lend depositor’s money, as he says in the same article “Governments and banks are the two entities with the power to create something from nothing.” Being pedantic, that is little bit simplistic, since banks can’t do so without their customer’s ALSO creating ‘money’ to the exact same amount when they sign the loan agreement.
However that very agreement is why he describes such bank loans as cash that “is not owned free and clear”. In stark contrast to government deficits, where “Private household…own that cash free and clear, and they can spend it as they like.”
I know Jamie udnertsands exaxtly what actually happens
As does Stephanie
I have been in meetings and discussion with both and know they know
I am just pointing out the argument could be interpreted otherwise
It needs to be refined to refer to deposited funds
@Stephen Ferguson. Thanks for providing the link to the James Galbraith article. What a rotten state of democracy where banker greed drives the denigration of government and massive obfuscation about how a country’s monetary system really works. Is it any wonder that Rachel Reeves refuses to see there’s no difference between government capital and current spending the former she hopes will drag in lots of commercial bank loans for her pals in the commercial banking world. I note the Observer has a clueless article about this differentiation today:-
https://www.theguardian.com/commentisfree/2024/oct/27/special-needs-provision-rachel-reeves-budget
I wonder when the Guardian/Observer journalists will wake up to the con that’s being imposed on the nation or do they get monitored for monetary system incorrectness?
@Richard Murphy October 27 2024 at 5:40 pm
Thanks. Fair point.
@Schofield Thanks. The great irony is that ‘adult in the room’ approach by the soft-left towards deficits (Obama back then in the US, Starmer now in the UK) leads directly to the rise of Trump and Farage etc. Centrists think they are so clever, but pandering to Big Finance, whilst leaving the people behind inevitably leads to one end: the rise of right-wing populists and the consequent end to democracy.
Strictly, banks create credit. Bank credit is different from Government money, because it cannot offer the Government guarantee, the cast iron ‘promise to pay the bearer’ only the sovereign issuer can provide; the everyday proof of that is the maximum £85,000 guarantee provided by Government for the public’s bank accounts. There is a Hierarchy of Money (Mehrling) that is too easily overlooked. The modern disparagement of “cash” fails to recognise its distinctive power (because it only matters in a financial crisis – and obliges the flight to “quality”, and essentially that is the flight to security and to cash), and the flight from banks.
Richard, superb point on loanable funds fallacy. But that critique is also something else I think you share with the Positive Money crowd. Kumhof, supports your critique
https://www.imf.org/external/pubs/ft/fandd/2016/03/kumhof.htm
He is an IMF and Bank of England economist and another supporter of the Chicago Plan approach, the sovereign money approach.
Thanks
Schularick and Taylor, “Credit Booms Gone Bust”, referenced by Kumhof stress the crises problem arises in the financial sector because there has been a decoupling of credit and money aggregates, the rapid rise in leveraging , and that credit growth is a reliable predictor of financial crises. Given the current obsession of the Labour government about the opinion of ‘Financial Markets’ in setting a Budget, this observation by Schularick and Taylor is striking: “the increasing dependence of the banking system on access to funding from financial markets could also mean that central banks are forced to underwrite the entire funding market in times of distress in order to avoid the collapse of the banking system as witnessed in 2008–09. This “mission creep” follows from the fact that banking stability can no longer rest on the foundations of deposit insurance alone, with the Lender of Last Resort now having to confront wholesale (i.e., nondeposit) bank runs.” (p.11). The ‘increasing dependence’ should be seen as a basic problem of financial security for Britain which at least requires to be addressed; and not the only solution to our fundamental structural economic weakness.
Schularick and Taylor examined the history of major banking crisis for a significant range of advanced countries, over circa 150 years. I have selected their closing remarks in their ‘Conclusions’:
“For policymakers, a complacent attitude towards the growth in the scale and riskiness of the credit system now looks like a misguided choice that ignored history.
Our quantitative analysis clearly suggests that the credit system matters above and beyond its role as propagator of shocks as in the financial accelerator model. The credit system seems all too capable of creating its very own shocks, judged by how successful past credit growth performs as a predictor of financial crises. Not all of this might sound surprisingly new to financial historians who have pointed for a long time to recurrent episodes of financial sector- driven instability in modern economies. But we are hopeful that some of the evidence we have assembled will inform new avenues of research into the role of credit in the macroeconomy” (p.29).
Not surprising, but very relevant.
I heard Meadway’s dislike of MMT on the Macrodose podcast, which I like and support via Patreon as it has its good bits, bit I couldn’t find a coherent argument against it. As you said Richard, he seems to dislike its lack of a class statement when that’s really not what it’s about. Very strange.
Here’s a link to the podcast
https://pca.st/episode/c0985708-452a-4de7-9048-d18316f9e4de
Thanks
Rather late in watching this interview and many comments already made….. but she really is good.
I love the hole and dirt analogy – reminds me of a classic line from “Porridge”. McKay asks Fletcher where the tunnellers hid the earth. Fletch says they dug a hole and buried it!
Banks opposing MMT as it allows government spending to “compete” with banks offering credit is interesting but doesn’t quite work for me; I prefer the simpler explanation – senior bankers and bank owners are wealthy and fear the MMT will take away their money. Nevertheless, I will ponder this – it certainly needs thought as draining/adding money (to control inflation) can be done through tax/spend or gilt sales/purchases and they have different effects on behaviour…. and I believe we need both fiscal AND monetary policy to control the economy.
Finally, MMT?, MMD? MManyletteryoupick? Just MM – Modern Money.
MM does it….
I am musing on those questions and will see what I can do with them when I can
This is going to be a very disrupted week though
Re competition between commercial banks and government creation of money because the former want to make money out of money this is the essence of market capitalism surely. If it wasn’t money in the past it was slaves. Don’t the Marxists have a lot to say about this human condition even if their solutions don’t pass muster too well? Anyway Galbraith and Kelton make an important point that politicians and voters are not seeing the wood for the trees in regard to money so heavy has the anti-government propaganda been!
Hi Richard thanks I find that Stephanie explains MMT well and spent this afternoon talking about MMT and the nonsense of govt black holes with a brother / sister
In law and his parents. Are you able to share a link to your explanation of George Osborn making the BofE pay interest to the Govt on so called Govt debt as that came up and apparently I wasn’t convincing enough. Grazie, Les
I confess, I cannot find that now
That’s the trouble with 21,000 posts
Richard
At Harvard Law Professor Christen Desan’s conference Money as a Democratic Medium, Kelton went beyond MMT
“a public role in you know financing the community the capital development of the economy.
I think we are off to something of a good start there but we need to do more.
I think on regulation and supervision of the financial system there is scope for much more to be done.
I’ll finish where I started, which is the direct provision of financial services.
I think direct lending to support public purpose.
I think doing more with guarantees for public private partnerships.
I think postal banking community development, central bank, digital currencies, all of this should be, I think part of any effort that, you know, substantially reforming, the financial system to make it, you know, or stable more equitable and you know serving the needs of the people broad way that we’ve been talking about here today. “
Stephanie Kelton says it how it is.
Richard – 21,000 posts?!!
I had no idea.
Sorry.
I’d ask for a ratio of supportive to denigrating ones but even that is unreasonable to ask for.
21,000. Wow.
I was wrong
It’s 22,395
I just checked…
Given James K Galbraith’s argument that commercial banks see a sovereign government’s ability to create money from thin air like themselves as a rival to their ability to profit from this “thin air” process surely a central objective of this blog should be how can this be mitigated.
https://www.thenation.com/article/archive/defense-deficits/